Regulator weighs new student-loan rules to avoid robo-signing rerun

AnnaMariaAndriotis

Bloomberg

Richard Cordray, director of the U.S. Consumer Financial Protection Bureau

Federal regulators are preparing to overhaul the way millions of student borrowers’ loan payments are processed in an effort to avoid a repeat of problems that plagued borrowers during the mortgage meltdown.

The Consumer Financial Protection Bureau is exploring new rules that would change a number of practices in the more than $1.2 trillion student-loan industry, according to people familiar with the matter. Under consideration are rules that could put requirements on student-loan servicers to help lower some borrowers’ monthly payments and change the way they process payments to lessen the chance of default. They could also address debt-collection tactics when borrowers fall behind on payments.

The consumer regulator is expected to submit a report to the White House as soon as Tuesday that describes student-loan-servicing problems as a big priority for the agency, while calling for changes to servicing and raising the question of whether new rules are needed. CFPB director Richard Cordray is also slated to testify in front of the House Financial Services Committee on Tuesday.

Any new rules would likely have an impact on borrowers of all ages, including parents and other adults who have cosigned for students’ loans. It could also represent the strongest move yet by the four-year-old CFPB to try to arrest the increasing prevalence of default among student loans.

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